Thursday, September 18, 2014

One in 10 Americans’ paychecks get docked to pay off debts

Published: Sept 16, 2014 4:05 p.m. ET


One in 10 Americans between the ages of 35 and 44 had money seized from a paycheck and sent off to pay a debt last year, a new report finds.

More than one-third of those wage garnishments were for student and consumer loans, like credit card or medical bill debt, according to the payroll processor ADP, which analyzed data for 13 million employees for the first study of its kind.

The data comes as American credit card debt hits post-recession highs, with the average household’s balance at about $6,802. And one in three Americans is dogged by collections, or debts more than 180 days past due, for credit card balances, child-support, medical or utility bills.

For most people, garnished wages went toward child support (41.5%). After student and consumer loans (35.4%), workers’ pay was also docked to pay off tax debts (18.3%) and bankruptcies (4.9%).

Those who earned $25,000 to $40,000 had their wages garnished for consumer debts more often than child support.

The data suggest a relationship between blue-collar jobs and pay seizures. “The employees living paycheck to paycheck are often hit with these garnishments,” says Julie Farraj, vice president of ADP wage garnishment services.